“House prices in the Nordic-4 [Denmark, Finland, Norway, and Sweden] rose in tandem from the mid-1990s until the recent peaks in 2007 but diverged afterwards. House prices increased by more than 120 percent on average in the Nordic countries between 1995 and 2007 (see Figure 2.1). Since 2007 peaks, house price co-movements seem to have dissipated. The real house price in Norway increased by more than 10 percent relative to the 2007 peak level, while house prices fell by close to 30 percent in Denmark. In Finland and Sweden, house prices have remained broadly constant around 2007 levels,” according to an IMF report on the Nordic Region.

“The estimates suggest house prices are overvalued in the Nordic-4, but the extent of overvaluation varies (see Figure 2.3). The chart shows both the range and the mean of house price gaps based on the three different measures discussed above [(i) a time-series model; (ii) deviations from a long-run price-to-income ratio; and (iii) deviations from a long-run price-to-rent ratio]. The average estimate of the valuation gap for Norway is just over 40 percent while the estimated valuation gap is less than 10 percent in Denmark. Average estimates for Finland and Sweden suggest that house prices are moderately overvalued, by 12 and 22 percent, respectively.”